Iwoca: Economic pessimism doubles among UK SME owners following budget
Economic uncertainty, and consequently pessimism, has risen among the UK’s 5.6 million small- and medium-sized enterprises (SMEs) following the UK’s Autumn Budget.
According to Iwoca’s third quarter 2024 SME Expert Index, the percentage of brokers reporting pessimism among their SME clients has more than doubled, rising from 15 per cent last quarter to 34 per cent.
Meanwhile, only one in three (36 per cent) brokers reported that small- and medium-sized firms feel optimistic, down from 56 per cent in the previous SME Expert Index.
Read more: Iwoca: SME brokers “tentatively bullish” on future
Mirroring this anxiety, concerns about an economic downturn have resurfaced among SMEs, with nearly half (47 per cent) of brokers saying the owners of small businesses are concerned about the possibility of a recession.
This has risen from 35 per cent and marks a reversal of a year-long trend in which brokers reported that recession concerns had steadily decreased.
Managing cash flow is now the top reason for loan applications, cited by 61 per cent of brokers – up from 49 per cent a year ago.
In contrast, only 36 per cent of brokers said their SME clients were seeking loans to drive growth, the lowest proportion recorded since the third quarter of 2023. This shift underscores the immediate need for financial stability as economic challenges intensify.
Demand for larger loans is also on the rise, with nearly half (45 per cent) of brokers anticipating a significant increase in applications for loans exceeding £100,000 over the next year, up from 28 per cent last quarter.
Read more: Beechbrook Capital raises £151m for first close of UK SME credit fund
High-value loans are becoming increasingly important, with 15 per cent of brokers expecting growth in loan applications for more than £200,000.
“Rising pessimism and fears of a recession are reshaping SME mindsets, with a greater focus on survival over growth,” said Colin Goldstein, chief commercial officer, UK at Iwoca. “We’ve seen a surge in demand for larger loans from businesses looking for extra financial stability in uncertain times.”
Iwoca recently doubled the maximum amount available through its Flexi-Loan product, allowing SMEs to apply for up to £1m in finance.
Read more: SMEs see 127pc rise in value of bad debt
